January 1, 2021

JF2313: Tennis To Investor With Sunitha Rao

Sunitha works in corporate financial planning for a biopharmaceutical firm while investing on the side for the past 2 years and currently has a portfolio consisting of 6 properties with a total of 9 doors. She shares how she dropped out of school to pursue tennis and eventually realized tennis wasn’t for her so she pivoted and went back to school to get a degree and now she is working full-time and building her wealth on the side part-time. 

Sunitha Rao Real Estate Background:

  • Works in corporate financial planning for a biopharmaceutical firm while investing on the side
  • 2 years of real estate investing experience
  • Portfolio consists of 6 properties with 9 door rentals
  • Based in Indianapolis, IN
  • Say hi to her at www.Griffixpropertygroup.com 

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Best Ever Tweet:

“You have to add value in everything you do” – Sunitha Rao


Joe Fairless: Best Ever listeners, how are you doing? Welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast, where we only talk about the best advice ever, we don’t get into any of that fluffy stuff. With us today, Sunitha Rao. How are you doing, Sunitha?

Sunitha Rao: Doing well, thanks. And yourself?

Joe Fairless: I am doing well, and thanks for asking. A little bit about Sunitha – she works in corporate financial planning for a biopharmaceutical firm, while investing on the side; she’s got two years in real estate investing experience. Her portfolio consists of six properties with nine doors, and she’s based in Indianapolis, Indiana. With that being said, do you wanna give the best ever listeners a little bit more about your background and your current focus?

Sunitha Rao: Sure. My background is a little different from many people, especially those in the investing world. I spent actually the first ten years of my “professional life” as a professional tennis player.

Joe Fairless: Nice!

Sunitha Rao: I turned pro when I was 14, that’s why the air quotations are there. I retired at 23; no money, no education. I dropped out of school after sixth grade. I was basically a train wreck, right?

Joe Fairless: So don’t have my daughter do that then, huh?

Sunitha Rao: No. Don’t. Keep her in school. [laughs]

Joe Fairless: Okay.

Sunitha Rao: So at that point I was all about “Let’s get a good job, let’s make that stable income, let’s get going with life. There’s no reason to be poor and broke for the rest of my years.” So I went back to school, I got my bachelor’s, I got a job at a Fortune 500 company, in their management training program; it was a rotational program meant to breed leadership… And I thought life was great. But as time went on, I realize — and by “time” I mean like two whole years. It didn’t take me too long to figure out what was going on, I think. I was giving so much of my time to this company, and I just wasn’t seeing the same returns back for the time invested… And I started thinking “There’s got to be a better way to invest my time so that I can have more financial freedom, and maybe even earn back some of that time in the future.” And that was when I started looking into different areas of personal finance; I found actually Bigger Pockets and real estate investing, and just kind of dove in head first, studying basically any free moment that I had… Because I was also getting my MBA and working full-time at that time. I like to have a full plate.  [laughs]

Joe Fairless: Clearly.

Sunitha Rao: And then it took me about two years to save up a little bit of money, and then I started investing in Indianapolis, after I’d saved up that money and gotten a little bit of that knowledge base. However, at this time I was still based in Boston, still working that full-time job, still trying to make ends meet, figure things out on a single W-2 income salary. So that in itself was a really interesting process.

After that first investment, spring of 2018, a little over two years now, I’ve gotten up to nine doors using a variety of strategies, from BRRR, long-term buy and hold, I have an Airbnb, I’ve house-hacked, I’m still house-hacking, I’ve done seller financing, investor financing, you name it. I’ve had to use a whole variety of strategies in order to make the most of my W-2 income, so that I can grow this business as safely and as quickly as possible.

Joe Fairless: Wow, you have just been resourceful and made it happen. When you left the tennis world at age 23, I think I heard you — you said you went back to school. Now, I imagine you already had your high school degree, right?

Sunitha Rao: Uhm…

Joe Fairless: No?! Okay, tell us about that. So you’re 23 years old and — what do you mean when you said you went back to school?

Sunitha Rao: So what I had was a GED, which was an equivalency diploma.

Joe Fairless: Yeah, that checks the box, right?

Sunitha Rao: Yeah, but this test is so easy; I feel like if you’re even halfway literate… I dropped out of school after sixth grade; I didn’t know any high school math. I didn’t even finish middle-school math, yet I don’t know how I was able to get a high school equivalency diploma when I didn’t do anything after that, essentially… So yes, I did have a high school degree, but when I went back to school, I enrolled in local community college and I had to take 6-8 months of remedial English and math classes to get myself back up to a college level. Then I started from there.

Joe Fairless: Okay. And then you got your undergrad?

Sunitha Rao: Yes. I eventually got kind of an academic merits scholarship, which is hilarious…

Joe Fairless: Wow.

Sunitha Rao: …and so weird, at a private school up in Boston called Babson College.

Joe Fairless: Oh, yeah.

Sunitha Rao: They focus on business and entrepreneurship. So I was really lucky to have landed that spot, and ended up getting my undergrad from there.

Joe Fairless: And how were you paying for school?

Sunitha Rao: Through scholarships and merits, and I was also working all the time; I was teaching tennis on the side, I was bartending on the side, waiting tables… I dog-sat, I baby-sat… I didn’t like kids then. [laughs] I did basically anything I could to fund my existence during that time.

Joe Fairless: So then you saved up some money and you bought your first place… What did you buy and how much money did you save up to buy it?

Sunitha Rao: I think at the time I had about $60,000 saved up. I bought — there were two homes on the same parcel. They weren’t attached, it wasn’t a duplex. It was a single-family home with a dethatched carriage house, and it was in one of the more affluent counties in Indianapolis, while not being in the most affluent city. So I was getting a lot of the run-off with people who couldn’t afford to be in the best area, but still wanted their kids in the best school district, and they wanted to be in a low-crime neighborhood, and that sort of thing. So it was a really good situation to have found; I found this while I was still half a country away, essentially.

So the numbers – the purchase price was 95k. I spent about 11k in initial rehab, and got that rented. Since then, I have transformed this property; it’s much more profitable now. At that time I rented the main house for $800 and rented the carriage house for $500. So it was still about 1.3% price-to-rent ratio. But since then I’ve had to invest probably another 13k, but I turned the dethatched carriage home into an Airbnb. It’s this 400 sqft. level home that is just so awkward and weird… But it’s been great as an Airbnb. I’ve been doing it about a year. I’m grossing between $1,400 to $2,000 amount, so that’s netting at least 1k a month after all of the  holding expenses, and stuff.

Joe Fairless: Wow.

Sunitha Rao: So it’s a little over 2% in a very good area.

Joe Fairless: And it’s been over a year since you’ve been doing the Airbnb. How has the impact been over the last 3-4 months?

Sunitha Rao: It’s actually not been too terrible. When Covid initially hit and the travel started to die down, and the quarantines were in place, I actually shifted to a medium-term rental, so like one month here, another person who wanted two months… So I was really lucky to have found it; it’s not like I went out searching for it, they just reached out to me via VRBO or Airbnb, and we’re like “What can you do…?”

I definitely had a little bit of a hit in terms of profit, but it’s still way more profitable than a long-term rental, so I consider that a win.

Joe Fairless: You bought it for $95,000… What type of financing did you get?

Sunitha Rao: Conventional. That was my first deal. There’s no way I was going into it with cash; not that I had it, or any other options… So yeah, I did the conventional route. But it’s actually helped me out getting into it with a little  bit more equity, because about a year and change after I purchased the property I refinanced that and a couple others into a commercial mortgage… And that property actually ended up appraising for about 140k. So I already had 20% equity, it appraised for 140k, and I was able to get a line of credit as a second position, that I’ve since been using to fund other rehabs and other acquisitions. So I actually didn’t mind in the long run having a little more equity in that property.

Joe Fairless: I’d like to talk more about that in just a brief moment… But first, you were in Boston at the time, and this is in Indianapolis… Are you from Indianapolis?

Sunitha Rao: No, I have never been to Indianapolis before doing that deal… [laughs]

Joe Fairless: Really?

Sunitha Rao: Yeah…

Joe Fairless: How did you come across the deal?

Sunitha Rao: MLS.

Joe Fairless: MLS, but how do you know — were you looking at MLS’es in a bunch of cities, or what?

Sunitha Rao: No, I was focused on Indianapolis. I’m a visual person, and what I did was I built out this map of where the Trader Joe’s were in the city, where the good school districts were, where certain crimes were happening, so I  could get a visual depiction of exactly which neighborhoods I wanted to be in. Then when I looked at the MLS, I would look at it in the map view; and when something popped up in my price range in the right area, I could pull that trigger really quickly and know what I was looking at.

Joe Fairless: And how did you have access to the MLS?

Sunitha Rao: Through a broker.

Joe Fairless: Through a broker, okay. So you were working with a real estate agent… And did they give you access  to the MLS? Or were they looking–

Sunitha Rao: They would just send me the drip feeds whenever something came within my criteria, and that’s when I would use the map view.

Joe Fairless: Okay, cool. Well, I wanna talk about what you just mentioned… You refinanced that and a couple others into a commercial mortgage, and then you got money out… Plus, you got a line of credit.

Sunitha Rao: Yes.

Joe Fairless: Please elaborate on that. Next level.

Sunitha Rao: This is one of my favorite things.

Joe Fairless: Yeah, next level is what it is.

Sunitha Rao: Thank you. [laughs] So a lot of people talk about having “dead equity” in the smaller residential area, and I don’t think that’s 100% true because of what I’ve been able  to do. It also, I think, highlights the importance of not only buying for cashflow, but also buying with plenty of equity and for appreciation in good areas. I’m a firm believer in balancing the two, and that it’s possible.

So I found a lender; it was a local portfolio lender. This was one of the benefits in terms of moving to Indiana, because then I was able to network and build the relations I needed to meet these people. But I’ve found this lender who would take a minimum of five doors — it didn’t even have to be five properties, just five doors… And they would appraise it. They would have to have first-lien position. So they would have to have the primary loan under their name, but then for whatever equity was left over after whatever they loaned on, they would give a line of credit. It’s essentially like a HELOC, but it was under my LLC, so it was kind of like a business equity line of credit; I don’t know if that’s actually a name, if that’s the actual name for it…

So I went with them, I refied, and even though it was on a 20-year amortization schedule, they were able to offer a lower blended interest rate that actually brought my payments down. At this point I think it’s like $200/month lower, despite being on a shorter amortization schedule.

Then they did the appraisal. There were three properties, five doors, and they said “Okay, you have this much equity. We will lend–” I think it was 80%. I forgot if it was 75% or 80% of that, in this line of credit… Which you can basically use as a credit card. I don’t use it a lot of time, but when I need to have the cash for a BRRR, or now that I’m paying that off, if I want to acquire, I can just pull on that cash and be a cash buyer, which is so impactful, and also really helpful, because on my single W-2 income it’s not like I’m gonna have hoards of cash sitting around. I’m just trying to figure this out and basically get by and grow this as time goes on. So having just this little pile for an acquisition fund is so beneficial.

Joe Fairless:  Oh, it’s empowering, because you know you’ve got that in your toolkit, and should you choose to exercise it, then you have the ability to close on deals that you wouldn’t have… But just the confidence in knowing that you’ve got that in your backpocket, it’s gotta be awesome.

Sunitha Rao: If you told me two years ago that I would have X thousand dollars just sitting in cash, doing nothing, until I want to do something with it, I would have told you you were crazy. But there’s a  way to achieve things if you just keep plugging along.

Joe Fairless: So on that refinance where you put it all under a commercial mortgage with a portfolio lender that’s local to Indianapolis – just so I’m clear, you didn’t get any money out, just that money that you would have gotten out was a part of equity that you have a line of credit against up to 75% or 80%… Is that correct?

Sunitha Rao: That is correct. I didn’t look into options for cash-out refi, because I didn’t want one.

Joe Fairless: Why not?

Sunitha Rao: So let’s say I could cash-out refi for 200k – then I could pull that cash out and it would also be sitting there, but then regardless of whether I am using it to earn a return or not, I’m paying for that. I much preferred with where I am at this point in my investment journey  to not have to incur extra costs while I’m not using the money.

Joe Fairless: And what do you mean by you’re paying for that in extra costs?

Sunitha Rao: Because it’s essentially a loan, right? So if it’s a cash-out refi, you’re taking out that 200k, you’re taking the money from the bank and you are keeping it. And if you get to keep the money, they’re like “Sure, you can keep it, but you’re gonna be paying that in a larger loan value.” Now I only took out, let’s say, 150k, so I’m only paying for 150k until I wanna use that 50k. When I use that 50k and I can earn a return with it, then I’m like “Okay, I’ll pay the bank for it, because I’m making money off of it anyway.” But the rest of the time, I don’t have to.

Joe Fairless: Do you remember what the interest rate is?

Sunitha Rao: Yes. Initially, it was 5.5% for the primary, and I think the HELOC (or the BELOC) was 6%, but then when interest rates dropped this year, I went back to them and I brought them like a bunch of business, and we’d all become buddies, and I was like “Guys, help me out here.” They were like “Okay, let me talk to underwriting.” Because it was a portfolio lender, because they did everything in-house, a week later they came back and they were like “Okay, we’ll lower your rates.” And I didn’t have to pay a dime or do anything else.

So now I’m at 4.75% on the commercial/primary, and 4.75% on the business line of credit.

Joe Fairless: Good for you. Wow, they lowered both.

Sunitha Rao: Yeah.

Joe Fairless: I could see them lowering the line of credit rate, but you’ve got some power of persuasion to have them lower the other one… It wasn’t fixed, was it?

Sunitha Rao: Five-year balloon.

Joe Fairless: It was a five-year balloon… Fixed interest rate?

Sunitha Rao: Until the five years, and then we’ll see after that.

Joe Fairless: Yeah. So they lowered a fixed interest rate?

Sunitha Rao: Mm-hm…

Joe Fairless: Wow. [laughs]

Sunitha Rao: It pays to make [unintelligible [00:17:42].02]

Joe Fairless: That’s me clapping right here. That’s me clapping. Wow… Okay. So let’s talk about what you did right there with the lender who you had a fixed interest rate with, but yet you go to them and you somehow convince them to lower your fixed interest rate. I’m not sure the right question to ask, other than I’ll start with how did you convince them to do that?

Sunitha Rao: It’s everything else. You have to add value. If I hadn’t worked on building those relationships… I make it as easy as possible for them to work with me. They’re working with me because they make money off of me. And if they need information when they’re trying to get something to work, I am on it right away. I answer emails, I don’t make them wait, and then as time goes by, when I find people who I think will be a good fit, I’m always looking to connect people. And if I can find people who will be a good fit, then I connect them right away. Sometimes it works, sometimes it doesn’t, but I try to make sure that it will work before I meet with them, so that I don’t waste anybody’s time.

Joe Fairless: What are some examples of how you added value to them in the past, other than you business?

Sunitha Rao: I brought them other investors who were looking for similar products in the area, and who I thought would also be easy to work with and enjoyable for them to work with. It’s not enough that they just bring money if the guy’s a complete jerk. So I’m very careful with the people I connect. I like to make sure that they’ll be able to execute, and they’ll also just be generally good people.

Joe Fairless: And how many customers have you brought them?

Sunitha Rao: Quite a few. I don’t know the exact numbers, but these aren’t people who have one home or two homes. These are also portfolios of dozens of homes, or millions of dollars etc. So I bring them the gamut, and then I also work to help them on their residential space; there are other people I know who are trying to have HELOCs – I’ll connect them. So then I have an overall holistic, strong relationship with the bank.

So even if I’m like “Hey, I haven’t done anything for a minute for you, but I talked to the other lady on the residential side and I heard things are going well. She’s gotten a couple HELOCs” etc. So they want to keep working with me because I’m bringing value to them personally, but also to the bank.

Joe Fairless: It makes sense. So if you had to guess or estimate about  how many referrals you’ve sent their way… Give it your best shot, if you wouldn’t mind.

Sunitha Rao: Probably at least two dozen, at least.

Joe Fairless: And they’re highly qualified, based off of what you’re saying.

Sunitha Rao: Oh, yeah.

Joe Fairless: Say you’ve got a new referral today. Are you sending it to the same person you’ve been speaking to all along and have a relationship with, or are there a couple people that you make sure always copy it on the emails, and they see that you’re hooking them up.

Sunitha Rao: I try not to flood anyone’s inbox. So the people who will directly benefit are the ones who will have that connection.

Joe Fairless: Okay. So do you have one point of contact there?

Sunitha Rao: It depends on the need. Within that specific bank there are two points of contact, and I’ll loop in whoever is needed at that point.

Joe Fairless: Okay, so there’s two different people who you have a really strong relationship with.

Sunitha Rao: Yeah. And you also have to really know what they’re looking for and what they can offer. If someone comes to me with a cash-out refi, wanting a contact for a cash-out refi for X property, and I know someone at that bank – if one side of that bank is not gonna work, I won’t even go there, because that’s not gonna be in the investor’s best interest. It is  a warm lead for the bank, but the bank might not be able to execute on that, so why would I wanna waste their time?

So it’s about looking through and evaluating each individual with their unique needs, and figuring out how to help them, and that in turn somehow helps you… I don’t know. But it’s worked.

Joe Fairless: Oh, absolutely. I have a relationship with a local bank, and I have not once asked them  “What types of customers are you looking for, who maybe I can bring them to you?” I’ve never asked that. Never even thought to ask. And I pride myself on — I have a vision board, and on my vision board in the middle it says “The secret to living is giving.”

Sunitha Rao: I love that.

Joe Fairless: But I’ve never even thought of asking the questions that you were asking them, and then connecting those dots…

Sunitha Rao: It’s not just that either… So when I talk to the residential broker there, I’m like “Okay, so if I bring someone to you, what’s the most efficient way to get them through your process and to give you the information?” And she’ll be like “Okay, if this is the situation, just send me an email. If this is the situation, they can apply online. Here’s the link.” That also makes it more efficient for both the banker and the person trying to reach out for the loan product.

If they are larger investors, usually I connect them personally, so that both sides can build that relationship, because there’s more possibility for a long-term relationship in those situations.

Joe Fairless: Yeah, that is beautiful. That is absolutely beautiful. I will today email my point person at my local bank and ask her — in so many words; I’ll wordsmith it, but “Who can I introduce you to? What are you looking  for to help your business?” And then as a follow-up, what’s the best way to do that, so that I’m not (as  you were talking about) flooding someone’s inbox and not becoming a nuisance when I’m trying to help; I don’t want it to backfire on me.

Sunitha Rao: Exactly, exactly.

Joe Fairless: Well, taking a step back, what is your best real estate investing advice ever?

Sunitha Rao: It is to think outside the box. I’m paraphrasing a Steve Jobs quote that I saw somewhere, but it has to do with getting ahead. If you want to succeed or get ahead, look at what others are doing, but do it differently. And I think investing is no different. When we invest in real estate, it’s the same thing like buying a stock. You’re trying to identify a mispriced asset. And if you are looking at everything in the same way that everybody else is, if you’re looking in the same place that everybody else is, doing things the same way, you’re shooting yourself in the foot.

So that’s in terms of investing… But then also, looking at what others are doing who might have the same goal. My goal is financial independence, and I have a lot of friends in the FIRE arena; one of them was like “Yeah, you have to go to FinCon.” FinCon, for those who haven’t heard of it, the tagline is “Where money and media meet.” It’s the largest personal finance conference, geared towards those who put out financial content – financial advisors/websites etc. When he told me that, I was like “You’ve got to be out of your mind. I don’t have a website.” I didn’t have an Instagram at that point. I had three houses. I was like “What am I gonna do?” But I trusted that he knew what he was doing, because he was so much more successful. And I went, and it was one of the best decisions I could have made for my investing career. I met so many people, got so many ideas… It was amazing.

So don’t be afraid to do things differently than  maybe you initially saw yourself doing.

Joe Fairless: Story of your life, right? Tennis from 14 to 23, and then just making a very dramatic pivot at that point…

Sunitha Rao: Yeah, basically. Thanks for connecting those dots. I hadn’t seen that until this point.

Joe Fairless: We’re gonna do a lightning round. Are you ready for the best ever lightning round?

Sunitha Rao: Yes, I am ready. Let’s do it.

Joe Fairless: Alright. First, a quick word from our Best Ever partners.

Break: [00:24:46].11] to [00:25:27].00]

Joe Fairless: Okay, what deal have you lost the most amount of money on?

Sunitha Rao: I don’t think I’ve lost money on any deal just yet. However, I did just finish a BRRR. I literally refinanced three days ago, completed the refi… And that was not as successful as I had hoped, because — we all make rookie mistakes; I made rookie mistakes on this go around. I didn’t factor in holding costs, because it leased and rehabbed during the time of Covid, so we had trouble getting materials, it took longer… So I didn’t take that into account. I didn’t take in to account refinancing costs, etc. So I definitely ended up leaving more in the deal than I had wanted. I still would have done it, but that was a little bit sad for me.

Joe Fairless: What’s the best ever way you like to give back to the community?

Sunitha Rao: I am very passionate about social causes. At this point I’m a little bit formant in my activities, but in prior years I’ve been heavily involved in women’s causes, diversity and inclusion initiatives at my workplace, LGBTQ community stuff, presenting at workshops and just doing anything I can to help those who I think don’t have as strong a voice, or helping those who may not have allies. That’s really why also I’m in real estate… I really want to be involved in non-profit work as a long-term goal. I just can’t do that right now with my job in real estate.

Joe Fairless: Any non-profit in particular?

Sunitha Rao: Yes. One is the National Coalition of Domestic Violence Against Women. I am a survivor, so that is something that means very much to me. I’m also after my time in my LGBTQ [unintelligible [00:27:00].04] at my prior employer; I’m also really passionate about that. I have many friends who are in the LGBTQ community and have seen how they have suffered and been treated unfairly, and not been able to have the same experiences and opportunities as many of those who have the privilege of being straight, or in more of a majority position. So those are two areas I’m particularly passionate about.

Joe Fairless: How can the best ever listeners learn more about what you’re doing?

Sunitha Rao: I have a website and I have an Instagram. Both go by the same moniker, GriffixPropertyGroup.com. And then my Instagram goes by that handle, @griffixpropertygroup.

Joe Fairless: Sunitha, it was a pleasure having a conversation with you and learning from you and your path, and your resourceful ways about getting deals done… Which we didn’t get into a whole lot, but I’m confident that we got into some stuff that was at least equally as valuable, which is adding value, and specific ways to add value to lenders, so that you can build that relationship and ultimately save money on what is likely your largest expense for the deal.

Thanks for being on the show. I hope you have a best ever day, and we’ll talk to you again soon.

Sunitha Rao: Thanks for having me.

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